Daily Market Commentary 19th January 2022

US equity markets crashed after celebrating the extended MLK long weekend. Share markets were sharply lower amid concerns over economic performances and the impact of the latest wave of COVID. Recent economic data releases have pointed to a difficult economic period ahead, with rising inflation forcing rises in interest rates and sagging growth. US Retail Sales and Consumer Confidence numbers were bleak and the Empire State Manufacturing Index was sharply lower. The interest rate environment points only one way, upwards, with US Bond Yields surging right across the curve. This supported a stronger US dollar, with the EUR falling to 1.1320, while the GBP drifted to 1.3570.

The surging reserve pushed commodity currencies lower, with the AUD falling to 0.7170, while the NZD crashed to 0.6750. The NZD was lower despite strong Global Dairy prices, but was heavily impacted by a disastrous Business Confidence number, which contracted 28%.

A rising interest rate environment increases the costs of capital and slows economic growth. Markets are adjusting for an extended and sharp rise in rates.